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Instagram Snaps Up Rivals' Users

By David Jones E-Commerce Times ECT News Network
Apr 28, 2017 10:10 AM PT

Instagram on Wednesday announced that it had reached a milestone of 700 million members while enjoying the fastest-ever growth rate in the company's history.

The network has grown by more than 100 million members in the last four months, Instagram reported, although it took six months to accomplish its previous 100 million member increase.

The increased growth rate can be credited to new features like Stories, live video and disappearing messages in Direct, the company said.

"Ostensibly copied from Snapchat, the feature was significant in driving the ephemeral messaging app to an IPO," said Zach Fuller, an analyst at Midia Research.

"Yet since Instagram copied Stories, Snapchat's user growth has slowed to 82 percent," he told the E-Commerce Times, "whilst Instagram has continued to thrive."

Instagram last summer launched its Stories feature, which allows users to share multiple photos and videos in a slideshow format. The posts disappear after 24 hours and don't appear in a user's feed or profile grid.

Better Stories

Instagram recently updated its Stories features with new capabilities, including live video. It also announced plans to let businesses put immersive, full-screen video ads into Stories.

User engagement with Stories has grown to more than 200 million people per day, up from 150 million at the beginning of the year.

Instagram late last year added the ability to save posts, and 46 percent of users have saved at least one post since then, the company said.

Another new capability that became available earlier this year is the ability to save live video to mobile phones at the end of a broadcast.

The rapid growth at Instagram is in part due to younger social media users switching to it from rival platforms, noted Midia's Fuller.

Instagram "competes directly with Snapchat but is better to use and integrates better with Facebook," Michael Jude, a Stratecast/Frost & Sullivan program manager, told the E-Commerce Times.

Facebook acquired Instagram in 2012 for $1 billion, two years after CEO Kevin Systrom and CTO Mike Krieger founded the company.

Snap's Tough Road Ahead

Snap, the parent of Snapchat, earlier this year launched one of the tech industry's most successful IPOs in years, raising US$3.91 billion. However, the firm's financial results have revealed telltale signs that the battle between Instagram and Snapchat has begun to take a toll.

The company reported 2016 revenue of $404.5 million; however it widened its net losses to $514.6 million for the year, compared with $372.9 the year before.

In filings with the Securities and Exchange Commission, Snap disclosed that it had 158 million daily users who were creating more than 2.5 billion Snaps every day.

Snapchat faces competition from rivals like Instagram and Facebook, which have copied some of its best features, according to an IHS Markit report. Further, Snapchat's reliance on younger social media users poses a potential risk because brand loyalty can be fleeting.

"Facebook, through Instagram, is working to stunt Snapchat's growth," noted Rob Enderle, principal analyst at the Enderle Group.

It is "emulating what Snapchat does, making it redundant and new users less likely to download it," he told the E-Commerce Times.

"Instagram started out being far larger, it is backed by far better-funded Facebook, and there appears to be little you can do on Snapchat that Instagram can't do at least as well," Enderle pointed out.

"Since on social networks the power is in number of people on them, all Facebook's Instagram has to do," he said, "is be close enough to Snapchat so that users make their decision with regard to which one to use based on the app's user population, where Instagram has a huge current advantage."

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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